Bloomberg Privacy Breach Angers Wall Street Traders

Traders expressed outrage and disappointment that the news company that prided itself on ethics had allowed reporters to access personal information.

NEW YORK ( TheStreet) -- Traders and other Wall Street professionals expressed anger and disappointment that Bloomberg LP, owner of the widely-used financial data and information service, had allowed its news reporters to access personal information about individual users despite complaints from investment banking clients and their employees.

Bloomberg Editor-in-Chief Matthew Winkler, in a column that served as a company statement on the matter, acknowledged that reporters have had access to some client information considered proprietary since the 1990s. Winkler's admission follows a Goldman Sachs ( GS) complaint to Bloomberg last month that one of its reporters used personal information about a client's terminal usage to further a story.

Winkler acknowledged in a column entitled "Holding Ourselves Accountable," that reporters had access to information about how often and in what manner Bloomberg clients, many of whom are bankers and portfolio managers regularly in the news, use the terminals. Bloomberg leases its terminal for about $20,000 a year for making trades and accessing financial information on companies, funds and individuals.

"The revelations of this encroach upon the broader privacy issue that all Bloomberg users should be concerned about," Keith Bliss, senior vice president at Cuttone & Co., a New York-based brokerage, said in a phone interview. "We're paying them handsomely for a service, and we expect our privacy to be maintained. If their looking inside the system is violating privacy policies to get leads on stories, nobody can be too happy about that."

Bloomberg, The New York Times reported today, conducted an internal review on the matter in 2011 but made no substantive changes to reporter access as a result. That no changes were made "is a little more troubling from the standpoint that to maintain their integrity and heighten their ethics they wouldn't have taken corrective action right then," Bliss added.

Goldman Sachs officials asked Bloomberg to address the matter of reporter access to client information after JPMorgan Chase & Co. had also broached the subject "but hadn't taken it as high as we had," said Goldman spokesman David Wells in a phone interview. Bloomberg told Goldman officials that steps have been to correct the situation, Wells added.

The admission was a stunning turn for Winkler who has long been the driving force behind the news operation's assertion that its reporters adhered to a level of ethics that other newsrooms minimized. Winkler said reporters would no longer have access to information not available to other customers.

"It always makes for a good headline to see somebody who has been on their high-horse for a very long time take a blow," said Adam Mattessich, head of international equities at Cantor Fitzgerald, said in a phone interview. "Until now, there's never been anything but the highest standards by that company. But until we know whether this is broader or narrower, it's hard to say whether this is an isolated incident or if the ethics motto they've been pounding for all these years was actually empty."

Cuttone & Co., Bliss said, is unlikely to reduce or end their contract with Bloomberg as a result of the disclosure. He said he didn't expect other financial services firms to do either. Likewise, Cantor Fitzgerald has no plans to cut back on its usage of Bloomberg terminals, Mattessich said.

New York-based Bloomberg, founded by New York Mayor Michael Bloomberg in 1982, gets about 85% of its roughly $8 billion in annual revenue, from terminal sales.

The Federal Reserve and the U.S. Treasury Department are looking into the situation and have been in contact with Bloomberg executives, a bank spokesperson said and an agency spokesman said in e-mails.

A trader who asked that his name be withheld said he had long presumed that information about Bloomberg terminal usage was private, and couldn't be accessed by the company's news reporters. "A level of trust has been violated," he said.